Question 1

Mike has been unemployed for over a year.He hasn't looked for a job in the last three months,but he's just started looking for work again.Because Mike started looking for a new job

Accepted Answer

A)  the unemployment rate increased.
B)  the labor force participation rate decreased.
C)  the unemployment rate decreased.
D)  the working-age population increased. A

Question 2

The "new product bias" in the consumer price index refers to the idea that

Accepted Answer

A)  consumers switch to new goods when the prices of old goods increase,and the CPI overestimates the cost to consumers.
B)  consumers switch to old goods when the prices of new goods increase,and the CPI underestimates the cost to consumers.
C)  consumers prefer new goods,even if they are worse in quality than old goods,and this causes the CPI to underestimate the cost to consumers.
D)  new products' prices often decrease after their initial introduction,and the CPI is adjusted infrequently and overestimates the cost to consumers. D

Question 3

Explain what economists mean by full employment and why this rate of unemployment is not zero.

Accepted Answer

Full employment occurs in the macro economy when cyclical unemployment is zero.The full-employment rate of unemployment is then made up of the frictional rate of unemployment and the structural rate of unemployment.Because it will always take time to find a job,frictional unemployment will never be zero.Also because demand and technology are constantly changing in an economy,structural unemployment will never be zero.That is,some workers will always lose their jobs as the demands for the products they make fall or disappear entirely.

Question 4

Which of the following would increase the unemployment rate?

Accepted Answer

A)  a law making it illegal to work more than 35 hours per week
B)  a cut in unemployment compensation
C)  an increase in unemployment insurance payments
D)  a decrease in the minimum wage

Question 5

A lumberjack loses his job because timber cutting restrictions were imposed by the EPA to protect the spotted owl habitat.This lumberjack would be

Accepted Answer

A)  frictionally unemployed.
B)  cyclically unemployed.
C)  structurally unemployed.
D)  seasonally unemployed.

Question 6

The substitution bias in the consumer price index refers to the idea that consumers ________ the quantity of products they buy in response to price,and the CPI does not reflect this and ________ the cost of the market basket.

Accepted Answer

A)  change; overestimates
B)  change; underestimates
C)  do not change; overestimates
D)  do not change; underestimates

Question 7

Which of the following is not an example of inflation causing a redistribution of income because the inflation was unanticipated?

Accepted Answer

A)  A firm signs a 3-year contract with a union based on a 2 percent anticipated rate of inflation per year,and the actual rate of inflation ends up being 7 percent per year.
B)  A worker receives a raise in salary that is less than the rate of inflation,because management under-predicted inflation.
C)  Firms have to hire an extra worker to change prices in its store because of inflation.
D)  A bank collects a lower amount of interest from a loan because inflation was under-predicted.

Question 8

Counting part-time workers who are looking for full-time work as employed overstates the degree of joblessness in the economy.

Accepted Answer

A) True 
 B)False

Question 9

Suppose you lend $1,000 at an interest rate of 10 percent over the next year.If the expected real interest rate at the beginning of the loan contract is 4 percent,then what rate of inflation over the upcoming year would be most beneficial to you as the lender? An inflation rate

Accepted Answer

A)  equal to 0 percent.
B)  greater than 6 percent.
C)  equal to 6 percent.
D)  equal to 4 percent.

Question 10

If the nominal interest rate is 6% and the inflation rate is 9%,then the real interest rate is

Accepted Answer

A)  -3%.
B)  3%.
C)  6.67%.
D)  15%.

Question 11

Someone who is available for work but has not actively looked for work in the previous four weeks would be classified as

Accepted Answer

A)  employed.
B)  unemployed.
C)  not in the labor force.
D)  not in the working-age population.

Question 12

The inflation rate measures the percentage increase in the price level from one year to the next.

Accepted Answer

A) True 
 B)False

Question 13

Table 9-12
 
-Refer to Table 9-12.Consider a simple economy that produces only three products: burritos,flashlights,and golf balls.Use the information in the table to calculate the inflation rate for 2018,as measured by the consumer price index.

Accepted Answer

The answer of Table 9-12
 
-Refer to Table 9-12.Consider a...

Question 14

In 2017,Boeing announced that it was laying off 1,800 employees in addition to the 7,000 workers it had cut the year before.The laid-off employees who were eventually able to find jobs at another aircraft manufacturer such as Airbus or Bombardier would have been considered ________ during the time they were out of work.

Accepted Answer

A)  structurally unemployed
B)  frictionally unemployed
C)  seasonally unemployed
D)  cyclically unemployed

Question 15

Suppose the labor force stays constant,and the working-age population stays constant,but a greater number of persons who were unemployed become employed.The labor force participation rate will

Accepted Answer

A)  increase.
B)  decrease.
C)  remain constant.
D)  not change in a way that can be predicted.

Question 16

Table 9-4
 
-Refer to Table 9-4.Assume the market basket for the consumer price index has two products-meat and potatoes-with the following values in 2013 and 2018 for price and quantity: The Consumer Price Index for 2018 equals

Accepted Answer

A)  125.
B)  129.
C)  135.
D)  141.

Question 17

Suppose that the labor movement has a revival in the United States and the majority of workers join labor unions.As a result we would expect

Accepted Answer

A)  the labor force participation rate to fall.
B)  the unemployment rate to fall.
C)  the unemployment rate to rise.
D)  no change in the unemployment rate or labor force participation rate.

Question 18

Table 9-14
  The table above reports the nominal average hourly earnings in private industry and the consumer price index for 1965 and 2010.
-Refer to Table 9-14.The real average hourly earnings for 1965 in 2010 dollars equal

Accepted Answer

A)  $3.87.
B)  $5.80.
C)  $12.10.
D)  $18.14.

Question 19

You earned $30,000 in 2009,and your salary rose to $80,000 in 2018.If the CPI rose from 82 to 202 between 2009 and 2018,which of the following is true?

Accepted Answer

A)  There was deflation between 2009 and 2018.
B)  The purchasing power of your salary fell between 2009 and 2018.
C)  The purchasing power of your salary remained constant between 2009 and 2018.
D)  The purchasing power of your salary increased between 2009 and 2018.

Question 20

Why would a firm pay efficiency wages?

Accepted Answer

The answer of Why would a firm pay efficiency wages?...

Exam 9: Unemployment and Inflation